NovaBridge Biosciences (NBP) 2022 Q2 法說會逐字稿

Ladies and gentlemen, welcome to the Biopharma Financial Results and Business Update Conference Call for the 6 months ended June 30, 2022. This is Tyler Ehler here. I'm at Senior Director of Investor Relations. (Operator Instructions). Earlier today, we issued a press release providing a review of our financial results for the 6 months ended June 30, 2022, as well as an overview of our recent corporate highlights and upcoming milestones. The press release can be accessed on the Investor Relations portion of our website at ir.i-mabbiopharma.com.

Joining me today on the call from I-Mab's senior management team are Dr. Jingwu Zang, our Founder, Chairman and acting CEO; Dr. Andrew Zhu, our President; Mr. John Long, our CFO; and Mr. Richard Yeh, our Chief Operating Officer.

Dr. Zang will provide a high-level overview of our recent achievements and upcoming milestones, while Dr. Andrew Zhu will provide an update on our R&D progress. And finally, Mr. John Long will then provide a summary of our financial results for the 6 months ended June 30, 2022.

Before we turn the call over to the operator to take your questions. Please note that today's discussion will contain forward-looking statements relating to the company's future performance in order to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion.

A general discussion of the risk factors that could affect I-Mab's business and financial results is included in certain filings of the company with the Securities and Exchange Commission. The company does not undertake any obligation to update this forward-looking information, except as required by law. We'll also discuss specific non-GAAP financial measures for comparison purposes only during today's call. Please see the financial results and the news release issued earlier today for a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results.

With that, I'll now turn the call over to Dr. Jingwu Zang, our Founder, Chairman and Acting CEO, Dr. Zang. Please go ahead.

Thank you, Tyler. Thank you to everyone for joining us. It is a pleasure to welcome all of you to our call today to discuss our business updates and financial results for the 6 months that ended on June 30, 2022. Since the start of 2022 calendar year, we have been facing challenges similar to many of our peers across the industry. The company has acted effectively to reposition itself to focus on our fundamentals. Today, we will report how the company is laser-focused on key business priorities and high-value milestones and catalysts as we continue to drive value for our shareholders. On the pipeline development front, we met seven key clinical milestones, including positive data readouts for three of our key assets, uliledlimab, lemzoparlimab and TJ-CD4B. Our goal is to prioritize our resources on the value driver assets in our pipeline. To this end, we'll focus on five clinical assets and 10 clinical trials, some of them are ongoing and some of them are yet to start.

For lemzoparlimab and uliledlimab, we will present more data on lemzoparlimab from our Phase II clinical trial in combination with AZA in MDS patients in China at an ESMO in early September and plan to initiate a Phase III clinical trial in China. With the rapid progress in the cohort expansion Phase II lung cancer study of uliledlimab, we expect to present more data later this year. On our new Star project, TJ-CD4B, is also progressing well in a Phase I clinical study in the U.S. and China. Dr. Andrew Zhu will further highlight this asset later in today's discussion.

Now with the progress on uliledlimab and TJ-CD4B, we expect to facilitate our BD deals as part of our business strategy and as one of our key priorities. As a result of the progress made in the first half of 2022 and a continued progress to be made in the second half of 2022, we expect to deliver 2 or 3 BLA submissions or approvals for felzartamab, eftansomatropin alfa along with 4 to 5 new drug molecules moving towards the R&D stage or into a Phase I clinical trial in the next 3 years.

Our pipeline has significantly advanced to a completely different stage from when we look back to our IPO, 2.5 years ago. It is not only globally competitive with a potential first-in-class assets such as lemzoparlimab and uliledlimab, but also advanced with two assets year and product launches within the next 3 years. Meanwhile, a portfolio of new molecules is moving towards the clinic.

On the corporate development front, during the reporting period, we have seen a clear path to commercialize felzartamab and eftansomatropin alfa. We will partner with a leading domestic big pharma companies with the proven commercialization capabilities and established sales forces and channels for eftan and felzartamab. We have already established a commercial partnership with Jumpcan for eftan, a market leader in the pediatric therapeutic area in China and have been working with them to prepare for the BLA and the subsequent product launch.

We are working on a similar commercial partnership for felzartamab. Therefore, with the commercial partnership strategy, we'll be able to avoid draining significant resources into building a large sales forces and establishing our own commercialization capability for these two near-market products in this difficult time when our cash runway is essential. We must focus on our competitive advantages to prioritize our resources in the development of our high-value assets. Additionally, I'm pleased to report that our state-of-art GMP manufacturing facility owned by I-Mab Hangzhou is operational, has successfully manufactured batches of clinical grade material, including lemzoparlimab. Our Phase II facility is on track to be completed by 2024 for commercial production.

Now I would like to emphasize that we maintain a strong cash position with $586 million cash on hand. On top of that, we will continue to receive potential milestone payments from the existing out-licensing deals including the development milestones from the amended deal with AbbVie and the Jumpcan deal. As we continue to deliver the project milestones within the next several years, we expect to collect a significant amount of milestone payments as agreed in the respective agreements. As a result, our cash is sufficient to fund business operations through 2025 for over 3 years.

On the capital markets front, during this reporting period, the company has completed the process for its previous commitment to engage in a U.S.-based public accounting firm that is subject to inspection by the Public Accounting Oversight Board, the PCAOB, for the preparation of its audit reports commencing from the fiscal year of 2022. Now on August 26, 2022, the PCAOB of the U.S. signed a statement of protocol with the China Securities Regulatory Commission. and Ministry of Finance of the People's Republic of China, governing inspections and investigations of audit firms based in Mainland China and Hong Kong.

We have noted this is a significant step towards resolving the delisting issue. The company has now taken the stance to continue implementing the ongoing work to achieve audit switch as planned, while waiting to see how the agreement is evolving between the two governments. This development may ultimately mitigate delisting risks on the HFCAA. However, our goal is to ensure the delisting risk is completely resolved for the fiscal year of 2022. Therefore, the company will either maintain the status quo after the agreement is executed within the next few months, or we switch to a U.S.-based auditing firm to meet PCAOB requirements as originally planned.

Now here, I would like to emphasize I-Mab's unique business model for value proposition. I-Mab has a powerful improvement on the engine that is our competitive advantage. I-Mab's innovation comes in three ways. lemzoparlimab and uliledlimab are the best examples of I-Mab's first wave innovation. They are now in Phase II and are ready to move towards Phase III, while we complete a global deal for lemzoparlimab and are working on a potential deal for uliledlimab.

The second and third waves are comprised of novel bispecific antibodies or uniquely formatted therapeutic drug molecules sooner than are already in clinical trials and others are in preclinical development, expect to have 4 to 5 new molecules moving towards the clinic within the next 3 years. With the competitive advantage of our R&D and progress in top line development, I-Mab's value proposition is really two tranched. One is to out-license the global rights of our innovative assets after early clinical validation. lemzoparlimab is one prime example. As a result, the company has received -- accumulated cash amount of $249 million so far from multiple deals, and we'll continue to receive additional development milestone payments as we deliver upon those agreed project milestones. In addition, we continue to explore potential partnerships for uliledlimab and TJ-CD4B bispecific antibody.

Next, we expect to create value through commercial partnership deals in China. More specifically, we developed the clinical assets towards commercial stage in China and partnered with pharmaceutical companies that have established sales forces and sales channels to rapidly gain market share. As exemplified in the commercial partnership with Jumpcan for eftan growth hormone, we typically receive upfront payments as well as milestone payments and a 50-50 profit split for our products to be marketed in China. We are now working on a potential commercial partnership for felzartamab. This model of value proposition is unique and relies on I-Mab's R&D competitive advantages in immuno-oncology and business development capabilities.

At I-Mab, with multiple successful examples in the past few years, this value proposition model has been proven and works well in our hands. We will continue to deliver the expected results. This model also helps prioritize and focus our resources on higher-value business activities while it avoids spending resources to build our own commercialization capability.

Now since the beginning of this year, we have been focused -- we have been facing the same challenges as many other companies have faced in this market. So how do we best position the company to not only survive, but also thrive in this turbulent market as we continue to strengthen our fundamentals. For I-Mab, this means being laser-focused on delivering value drivers in the next 3 years. So we work to bring the most value to our shareholders.

Now the first aspect is to prioritize our resources on the value driver assets in our pipeline and create near-term value for our shareholders. As I have already mentioned, our pipeline is rich, but we must focus on assets that we believe have the most potential. Through our systemic science and business review, we have prioritized five high-value assets associated with 10 clinical trials. Some of these trials are ongoing, while others have yet to be initiated. For these key assets, we expect three potential BLAs in the next 3 years, more BD deals to reinforce our value creation model and extend our cash runway beyond 3 years.

Now the second aspect is our continued hunt for commercial partnerships. This includes partnership for the near-term commercialization of felzartamab for multiple myeloma and eftan long-acting growth hormone for PGHD. As discussed earlier, we will choose to partner with the leading domestic big pharma companies with proven commercialization capabilities with established sales forces and channels. We have already established a commercial partnership with Jumpcan, a market leader in the pediatric therapeutic area in China, for eftan long-acting growth hormone. We are now in the process of contemplating a potential commercial partnership deal for felzartamab.

The third aspect is to continue investing in our next-generation pipeline assets. This area is one of our core strengths. This next-generation assets include novel bispecific antibodies and immune adjuvant, which we believe have the potential to lead global trends in immuno-oncology. We are on the way to generating a novel portfolio of next-generation programs to bring 4 to 5 such new drug molecules to R&D and the clinic within the next 3 years. It is also worth mentioning again that our current cash runway with cash on hand plus the expected milestone payments over 3 years and is sufficient to support our core business activities, as I just laid out.

With that overview, I'd like to ask Andrew to take a deep dive into our key pipeline assets and provide our expectations for the rest of 2022. Andrew, over to you.

Thank you, Dr. Zang. It's my pleasure and privilege to speak with all of you today. The focus of my discussion will be on our pipeline development. I will highlight the recent progress and update as well as the near-term prospect of this very exciting pipeline. At I-Mab, we have 20 assets in development and 10 assets that are in clinical stage. Today, I would like to highlight five prioritized assets in our pipeline because they are value drivers. These assets are novel, highly differentiated and are highly competitive, either globally or in China. The five value driver assets include the two late-stage assets, felzartamab and eftansomatropin alfa, with our BLA to be delivered in 2023 and 2024. And the two Phase II and Phase III-ready global access, lemzoparlimab and uliledlimab, alongside with our new star, the best Pacific CD4B. I'll go through each asset in more detail.

First, let me start to highlight our two BLA assets, felzartamab and eftansomatropin alfa. Felzartamab is our most advanced asset. We have successfully completed the registration trial in China for felzartamab as a third-line treatment for multiple myeloma. Our study confirmed the efficacy of felzartamab with additional benefits such as lower infusion-related reaction rate and shorter infusion time. This allows the use of felzartamab in outpatient setting.

In January 2022, the company signed a partner agreement with Huangdao Qingdao government in China, to met the Huangdao Qingdao government in China to manufacture felzartamab locally to accelerate its commercialization. The local manufacturing plant is expected to significantly reduce the cost of goods and allow felzartamab to be commercially more competitive. In terms of the second-line treatment for multiple myeloma, a randomized Phase III registration trial of felzartamab in combination with lenalidomide, completed patient enrollment in September 2021. When the top line data is fully mature, we expect this data to support our BLA submission in 2023. In parallel, we are exploring a possible study of felzartamab in combination with lemzoparlimab for multiple myeloma. We expect to publish the preclinical data of felzartamab in combination with lemzo at ASH 2022.

Multiple myeloma remains a significant unmet medical need in China. Considering the relevance of this therapeutic target, it is important to note, there are approximately 28,000 new cases of multiple myeloma each year in Greater China, with approximately 100,000 second-line or third-line relapse or refractory multiple myeloma patients in China as of 2021. This represents an annual growth of approximately 2% to 3% per year. Felzartamab is uniquely positioned as the only locally manufactured CD38 antibody product with a distinct profile where it can be administered in an outpatient setting because of the short infusion time and lower infusion rate. We have also demonstrated compelling efficacy, including in elderly patients with multiple myeloma.

Next is eftansomatropin, RFO TJ101, our differentiated long-acting work hormone as a weekly treatment versus commonly used daily injections. Eftansomatropin alfa is the only natural long-acting growth hormone in its proprietary fusion protein format, i.e. a pure protein-based molecule is not chemically linked with PET or other linkers. Its safety, tolerability and efficacy have been well-demonstrated in a Phase II clinical trial conducted in Europe. As shown in the figure in the middle panel, a weekly or biweekly treatment with eftanso alfa showed comparable efficacy to daily Genotropin injection. Our registration Phase III TALLER trial is ongoing, and we have completed patient enrollment in May of this year and are on track for BLA submission in 2023 or 2024.

There are advantages using a weekly versus daily injection for treatment of pediatric growth hormone deficiency. This includes improved patient compliance with patients more likely to consistently take their treatment in a weekly or biweekly schedule versus a daily setting. In 2021, we entered into a strategic commercial partnership with Jumpcan to leverage Jumpcan's lost commercial network as a commercial leader in pediatric therapeutic area. Our agreement include upfront and potential milestone payment of USD 315 million as well as a 50-50 profit sharing although double-digit royalties on revenues. This partnership represents one of China's biopharma markets larger deals, which is a testament to the product's potential and to I-Mab's development capabilities.

Meanwhile, we expect eftansomatropin alfa to be highly competitive on 3.4 million addressable patient populations. We believe the China growth hormone deficiency market is large enough to give Jumpcan and I-Mab a fighting chance. And we have a real chance to take a substantial share of the market. Furthermore, given the lack of a pack and of chemical linkers, eftanso is the only long-acting growth hormone in the pure protein format, which offers potential safety benefits.

Next, I would like to highlight our highly differentiated CD47 antibody, including lemzoparlimab and a new CD47 antibody therapy. I would like to remind you that lemzo is differentiated by design to avoid binding to red blood cells while maintaining strong antitumor activity. This molecular differentiation has been validated preclinically and has translated into clinical advantages that are being validated. I-Mab's priority for lemzo is to achieve the first registration of lemzo in its class in China. This will allow lemzoparlimab to be the first CD47 to the market in China and potentially the first globally approved CD47 therapy.

Multiple clinical studies of lemzo are ongoing in parallel in both the U.S. and China. As seen here, you can take a look at our global clinical development plan. Outside of China, we have partnered with AbbVie, who is spearheading global efforts in the development of a new CD47 antibody and I will discuss the amended partnership on the next slide.

In China, I-Mab is leading the efforts in the 47 space. The most significant study is the Phase II clinical trial in MDS AML. This trial in combo with AZA. Our plan remains to initiate a registration trial for MDS patients by the end of 2022. We believe the differentiating feature of lemzoparlimab has gained preliminary clinical validation. The differentiation includes the expected favorable safety profile with no priming dose required, less RBC mediated zinc effects and compelling antitumor activity across several trials, which is consistent with lemzoparlimab's differentiation. The unique glycosylation around the binding side of lemzo serves as a natural barrier to prevent lemzo from engaging RBC. This means that red blood cells are only minimally accessible by lemzo. By contrast, the binding side on tumor cells does not have similar glycosylation and is fully exposed, which explains why lemzo binds strongly tumor cells. In a safety review of approximately 200 patients of today who are treated either with lemzo alone as monotherapy or in various combinations. We have seen a compelling safety profile today.

Overall, the efficacy data from both the U.S. and China studies continue to be favorable when administered without a priming dosing regimen. MTD was not reached in any dose regimen, mild PRA in solid tumors and NHL, good safety profile in combination with azacitidine in AML MDS and no Grade V hematological TRAEs has been reported.

Here, I'd like to highlight some of the high-level data from our Phase II trial of lemzoparlimab in combination with AZA in first-line higher-risk MDS patients in China that we shared at our R&D date in July. In this patient group, we have again seen good safety profile with lemzoparlimab well-tolerated in combination with AZA, despite the more severe baseline features related to underlying disease in this cohort. We have also observed comparable efficacy to magrolimab with an ORR of 87% and the CR rate between 31% and 40% depending upon the treatment duration.

We plan to present this detailed data set in a perfect presentation at ESMO on September 10, 2022, per the organizers' embargo policy. Additionally, as mentioned, we plan to initiate a Phase III registration trial before the end of 2022. And we have already submitted the communication package to CDAI to push this registration trial forward.

Importantly, AbbVie and I-Mab have entered into an amendment to the original license and collaboration agreement. Both parties will continue to collaborate on the global development of anti-47 antibody therapy. For the new anti-CD47 antibody therapy, the company will be eligible to receive and AbbVie will pay up to USD 1.3 billion in development, regulatory and sales milestone payments and the tier royalties will be at rate from mid- to high single-digit percentage on global net sales outside of Greater China.

The company retains the exclusive right to develop and commercialize all licensed products under the agreement in Greater China. Globally, AbbVie will focus on the new therapy, which is currently under development and discontinue the Phase I study of lemzoparlimab. In parallel in China, I-Mab will continue advancing its leading position on lemzoparlimab with a focus on the initiation of a Phase III clinical trial in patients with MDS in China. Today, Phase I and Phase II clinical studies of lemzo in U.S. and China, with nearly 200 patients have supported a good safety profile without the need of a priming dosing regimen. Lemzoparlimab in combination with AZA has shown to be efficacious in patients with higher-risk MDS in the Phase II study.

Next is uliledlimab another global front runner that we are developing to solid tumors with a focus on non-small cell lung cancer and ovarian cancer. As previously reported, uliledlimab is differentiated by design to avoid the hokey fab. So the hockey fab is simply characterized by an abnormal phenomenon where a drug molecule paradoxically loses fab at higher doses. Uliledlimab's differentiation comes from a unique binding epitope and these terminals. We believe the differentiation gives uliledlimab, a barter therapeutic window and more flexibility when combined with other antitumor drugs.

In addition, uliledlimab has potential advantages over small molecules with a noncompetitive inhibitory effect that is not blunted by the high level of CD73 enzyme substrate have normally accumulated in the tumor microenvironment, which could be expected for small molecule competitive blockers. In the Phase I study presented at ASCO in June 2021, where patients with solid tumors were treated with uli in combination with atezo. Among the 13 evaluable patients, overall ORR was at 23% and DCR was at 46%. The results, although preliminary, are very encouraging. We are conducting two Phase II clinical studies in both the U.S. and China. I hope to share the data as soon as possible.

I also want to mention alongside the planned data readout we continue to explore global partnership opportunities. With the data cutoff as of March 29 of this year, we recently shared this key patient cohort in the uliledlimab trial, where we saw encouraging efficacy signals in advanced non-small cell lung cancer patients who were unsuitable for or did not decline standard chemotherapy treatment.

In this cohort, most of the patients have stage IV non-cell lung cancer, approximately 80% of the patients in this cohort low PD-1 expression in baseline tumor samples. And that is tumor proportion score, TPS 1% to 49% or negative at TPS less than 1%. These patients are generally considered less responsive to PD-1 therapy. For example, in the KEYNOTE-042 study, patients with low TPS, i.e., 1% to 49%, achieve a response rate of 16.9% and patients with negative TPS appear to benefit even less likely.

Of the 19 efficacy valuable patients in our study, the response rate is 26% and DCR 74% with 5 PR and 9 stable disease observed with a median follow-up of 3.3 months. Interestingly, in this study, 7 out of 19 patients, 37% had a high expression of CD73, using 35% as a cutoff. When looking at patients with high CD73 expression, we noticed our disease control rate at 100% and also overall ORR response rate at 57%. We have 4 out of 7 patients are exhibited APR. In contrast, in 11 patients with low CD73 expression, only 1 PR was observed.

We're very happy to share some update on our expanded Phase II clinical trial. At this moment, we have 47 non-small cell lung cancer patients enrolled, and we're targeting the enrollment of 60 patients by October. We continue to observe encouraging efficacy signals in these 47 patients and a correlation of CD73 expression with clinical efficacy. We expect to have a more complete data readout by the end of this year or early next year. We have reached an agreement with WuXi Diagnostics to develop a CD73 metro diagnostic kit for the patient selection of uliledlimab's ongoing Phase II and planned Phase III clinical studies in non-small cell lung cancer. We are excited by this preliminary confirmation of a correlation between higher CD73 expression and an increased ORR. In parallel, we are exploiting a potential global partnership of uliledlimab.

The last compound I'd like to touch on today is our TJ-CD4B, the novel clouding 18.2, 4-1BB bispecific antibody that has made significant clinical progress as well. Of note, TJ-CD4B is a novel clouding 18.2 and 4-1BB bispecific antibody capable of binding to tumor cells expressing clouding 18.2 and stimulating intratumoral T-cell by the 4-1BB arm, which is designed to become active only upon tumor engagement to avoid systemic toxicity.

Previous generation of 4-1BB acnes antibodies encounter significant challenges. For example, for uliledlimab, the hepatic toxicity was a major concern, and for utomilumab, less efficacy was observed. Our TJ-CD4B has several distinct advantages that it can draw upon. It binds to a distinct 4-1BB (inaudible) that only triggers 4-1BB signaling upon clouding 18.2 binding. Our antibody is a unique conditionally active 4-1BB antibody that could stimulate the 4-1BB signaling only when the bispecific antibody engages the CDB clouding 18.2 positive tumor cells. And therefore, our bispecific antibody greatly reduces the systemic and liver toxicity, which we observed in other conventional 4-1BB antibodies. The results from the GRP costs in [Sino-Monkey] showed that this bispecific antibody was well-tolerated at the highest tested dose at 100 mg per kg.

Conditional T-cell activation upon TA engagement allows for localized immune activation in the tumor microenvironment and drastically reduces the peripheral T-cell activation and hepatic as well as systemic immunotoxicity without compromising antitumor activity. Additionally, this allows for minimal systemic toxicity. We believe this platform has the potential to assess multiple targets for their therapeutic development. And one of the core assets in our highly innovative bispecific antibody pipeline, TJ-CD4B is currently undergoing Phase I clinical evaluation in both the U.S. and China. In parallel, our ongoing dose escalation study is progressing very smoothly. TJ-CD4B is now at 8 mg per kg in the U.S. trial and 5 mg per kg in the China trial So far, we have already observed 1 PR, a patient with esophageal gastric cancer, who failed the standard three prior lines of therapy. In addition, we have observed three stable disease, and we currently have no unexpected safety signal encounter. This study is on track to generate more data by year end.

I would like to reemphasize our goal of translating cutting-edge science into innovative drugs to specifically address areas of unmet medical need. To achieve this goal, we focus on three waves of discovery to generate potential first-in-class and best-in-class assets. The first wave is monoclonal antibody or fusion proteins with unique differentiation, including the unique programs such as lemzo and uli, all of which have been in Phase II already for Phase III. In addition, we're also developing novel monoclonal antibodies that targets the driver immune checkpoint pathways and are designed to synergize with the existing clinical assets as combo therapies. The second wave is bispecific antibodies and these are in Phase I or in the IND-enabling stage. These assets are designed to target specific cancers such as gastric, pancreatic and ovarian and to target PD-1 or PD-L1 resistant cancers by turning a cold tumor to a hot tumor.

The third wave is super antibodies that were enabled by new technologies and formatted with novel modalities, program now in the preclinical stage. Among them, the immunoadjuvants are an area of focus, which is designed to prime and amplify immune response in tumors by different cytokine adjuvants such as efineptakin alfa and a few new assets. Here, I would like to cover the two newcomers to our innovative pipeline. On the left is our C64B, which is the third bispecific molecule developed, leveraging our conditional 4-1BB platform, which has the advantage of minimizing liver toxicity with an increasing therapeutic window. It is specifically designed to simultaneously target Claudin 6 expressed by tumor cells and 4-1BB expressed by T-cells to mediate the T-cell killing of clouding 6 expressing tumor cells. Claudin 6 is regarded as an attractive target due to its tumor-specific expression pattern shown on the middle lower panel, it is specifically expressed in ovarian cancer, along with testicular cancer.

We have now demonstrated TJ-CD64B can active T-cells through 4-1BB stimulation only upon CD -- only upon Claudin 6 engagement, providing a more localized immune activation in tumors with good efficacy and reduce systemic toxicity. On the right is our TJ-L1IF, and this is a novel PD-L1 interferon RF antibody cytokine fusion protein, which is specifically designed for the treatment of PD-L1, PD-1 resistant tumors through the addition of a strong immune adjuvant eftansomatropin alfa, in attempt to convert cold tumors to hot tumors on top of a PD-L1 antibody to achieve superior antitumor activity. TJ-L1IF was developed using Affinity's TMEA technology, is now under preclinical development. TJ-L1IF is a prodrug, in that interferon alfa-2b molecule is masked by a PET group through a protectable incur rendering the drug inactive in the systemic circulation, thus strongly reducing the systemic toxicity. We hope that these preclinical assets will reach to the IND-enabling stage very soon.

With that, I would like to turn the call back to Dr. Zang. Dr. Zang, please.

Thank you, Andrew. Now I would like to talk about what would be the next -- second half of 2022 look like in terms of key milestones. Now the first area is to deliver on the key pipeline milestones or catalysts. On the clinical development front, we will initiate the planned Phase III clinical trial for lemzoparlimab as a first-line MDS treatment. We have already submitted application package and are in the process of communicating with the CDE. In addition, we expect to achieve a few new data readouts, including lemzoparlimab, MDS Phase II clinical trial at ESMO in December. An additional -- and also additional data readouts for uliledlimab Phase II non-small cell lung cancer trial. And also a preliminary clinical data readouts for TJ-CD4B, as Andrew already mentioned. We also plan to initiate three new clinical trials in the U.S. and China.

The second area is to deliver key BD milestones, including potential out-licensing BD deals for uliledlimab alongside the possibility for our bispecific antibodies to be out-licensed. Additionally, as I mentioned earlier, we are working on a potential commercial partnership for felzartamab in China. The BD deliverables, however, take time and are dependent on negotiations with our potential partners. We will do our best as it is critical to our business.

Last but not least, as previously mentioned, we have completed the process to engage a U.S.-based public accounting firm that is subject to inspection by the PCAOB for the preparation of its audit reports. The new development is that U.S. and China regulatory bodies signed a stage of protocol relating to the inspection of audit funds based in Mainland China and Hong Kong. This may ultimately remove delisting risks in the event of the state of protocol does not meet the deadline for the company to mitigate delisting risk from the audit of 2022 financial report, we will finalize the change to our U.S.-based auditor, as originally planned. Additionally, our manufacturing facility of I-Mab Hangzhou has already successfully manufacturing batches of clinical trial material and our R&D center has been operational in San Diego, which are focused on translational medicine. So we are determined with the refocused strategy to deliver this critical milestones to drive pipeline value for our shareholders.

Now I would also like to highlight I-Mab's current value proposition. Firstly, we have two late-stage assets near BLA and commercialization in China with very significant market value. For felzartamab, we're exploring a potential commercial partnership for this asset. Eftansomatropin alfa is expected to become a major player in China growth hormone market with BLA expected by 2023, 2024, and we are working with our commercial partner, Jumpcan on the product launch preparation.

Secondly, our leading global assets including lemzoparlimab and uliledlimab have significant value to be realized as they advance towards Phase III development. For lemzoparlimab, we are on track to initiate a Phase III clinical trial in China for first-line MDS treatment by the end of 2022, depending upon the regulatory process and the preparation of the clinical sites around the country.

We amended our agreement with AbbVie for a new CD47 antibody therapy with $1.3 billion in milestones plus royalties. For uliledlimab, we are expanding our lung cancer Phase II clinical trial with encouraging clinical results, we expect to provide another Phase II data readout of 60 lung cancer patients very soon and continue exploring a potential global partnership. Thirdly, we have not talked about other clinical stage assets and multiple preclinical assets under development in our pipeline. One of our priorities is to bring some of those assets to clinical validation. The potential value of this portfolio is not being considered in our market capitalization today.

Fourthly, although delays due to various reasons, we continue pushing hard with additional BD deals for uliledlimab TJ-CD4B and additional new assets from our pipeline, along with a commercial partnership for felzartamab. It's worth mentioning as of June 30, 2022, our cash position is $586 million, which will be sufficient to support our business operations for over the next 3 years, plus we will receive additional milestone payments from the completed partnerships.

With that, I will turn it over to John to briefly review our financials. John?

Thank you, Dr. Zang. And thanks to everyone for listening today. First, let me provide an overview of our financial results for the first 6 months ended June 30, 2022. As of June 30, our cash and cash equivalents and short-term investments amounted to RMB 3.9 billion or USD 586 million. compared with RMB 4.8 billion for the first 6 months in 2021. In the first 6 months, our total net revenues were RMB 51.9 million. It consisted of revenues from the current strategic calibrations and from the supply of investigational products under the collaboration agreement.

Now let me turn to R&D expenses. R&D expenses during this period were RMB 453 million or USD 67.6 million compared with RMB 593 million for the comparable period last year. The significant decrease was mainly driven by the reduced demand of investigational products as we have prepared sufficient stock and lower share-based compensation expenses in 2022. Administrative expenses for the first 6 months were RMB 392 million or USD 58.6 million, compared with RMB 452 million for the comparable period in 2021. The decrease was mainly due to lower share-based compensation expenses and savings from our cost expenses initiatives implemented during this period.

For the first 6 months, our total net loss was RMB 1.47 billion on a GAAP basis inclusive of RMB 181 million equity losses in our Hangzhou [affiliate]. The net loss on a non-GAAP basis was RMB 848 million. The difference between GAAP and the non-GAAP was mainly driven by the noncash share-based compensation expenses booked during this period.

Next page. As mentioned by Mr. Zang, we want to reiterate that the company maintains a strong cash balance with USD 586 million on hand. Our current cash position, combined with potential upcoming milestone payments from previous out-licensing deals and collaborations is expected to further strengthen our cash reserves. We are quite confident that our cash position remains sufficient to support key business activities beyond 2025. The cash runway does not factor in potential upsides from additional cash related to potential new business payouts for new financing arrangements. We believe that our cash position provides us with ample insurance and flexibility to support key R&D activities over the next 3 years and beyond.

Last and importantly, I'm happy to report that with our prioritization strategy, we have implemented cost initiatives to save about 17% expenses compared to our original budget. This represents a positive cash impact of USD 32 million to the company. We will continue to implement our cost and expenses initiatives and further reduce the company's cash burn rate in the second half of 2022 and beyond.

By end of this year, we are on track to maintain our strong cash position and keep the balance at over $500 million target. This would allow us for an estimated run rate of over 3 years with potential additions to our cash position along the way.

With that, let me turn the call back to Tyler for Q&A sessions. Tyler, please.

Thank you, John, and thank you, Dr. Zang, and thank you, Dr. Zhu for that helpful overview of our interim earnings. (Operator Instructions)

First question goes to Kelly Shi from Jefferies.

Can you share more details about this new CD47 antibody therapy regarding molecular design and development status? And how does it differentiate from lemzo and also what the triggers that switch to this molecule from lemzo? I also have a follow-up.

Yes. Thank you, Kelly. Well, under the partnership with AbbVie, we have now a new CD47 molecule. Both parties have decided to continue to collaborate on the global development of this new molecule, which is in active development. I also mentioned that the amended agreement around this new molecule is about $1.3 billion, and I-Mab owns the executive -- exclusive China rights of the new molecule.

Now in terms of the properties of this new molecule, and a detailed information, we are under a confidentiality agreement with AbbVie and both parties are quite strict about this confidentiality agreement to share data and everything. So at this point, we're not able to disclose more data, but we hope that as we move forward, as we generate more data, we'll be able to identify an appropriate time to disclose the data. Now as discussed today, lemzoparlimab has a leading position in China. It's a very competitive position based on around 200 patient safety data and the recent Phase II efficacy data, as Andrew talked about. So we are committed to initiating a Phase III clinical trial very soon. while working with AbbVie on the new molecule. So at this point, that's all we can talk about.

Also just quickly for the Phase III trial in MDS. When are we going to start enrolling and how many patients do plan to enroll? And also at ESMO, do we expect the more data beyond what has been released on the webcast?

Yes. Thank you, Kelly. That question, maybe I can ask Andrew to address. Andrew?

Thank you, Dr. Zang. Thanks, Kelly, for your interest in our Phase III trial. As all of you are fully aware MDS is a very challenging therapeutic space. At this moment, as visiting AZA remains to be the standard treatment. So as a result, our Phase III, clearly, we will use AZA as our comparator arm. And we are currently in active discussion with CDE regarding the proposed Phase III optimal design. And we will definitely take into the consideration of the optimal endpoints. We are considering ORR, CRR, we are considering EFS and also OS as potential primary end points, and obviously, the selection, we will definitely detail the sample size.

We are also taking a very close look at the potential stratification so that we can actually balance the prognostic variables in both arms. So all these details are actually currently ongoing with CDE and also, we hope we can share with you in more details very soon. And also, we are confident that we can actually maintain our initial target initiation of our Phase III, hopefully, by the end of this year.

Thank you, Kelly for the question. And thank you, Dr. Zang and Andrew for a detailed response. Next, we have Andres Maldonado from H.C. Wainwright.

Congrats on the progress. So starting with felzartamab, in your considerations on the use of the hybrid commercialization model, it's just safe to assume this will be for multiple myeloma only? Or what are your thoughts on how this extends the autoimmune diseases? And curious on what should be our expectations in terms of deal sizing there?

Yes. Thank you. This is Jingwu. I can answer this question. We are in active discussions with potential commercial partners for a commercial deal for felzartamab. This potential partnership does include autoimmune disease indications. This is pretty much based on MorphoSys recent data on autoimmune nephritis.

So the data published by MorphoSys are quite exciting, indicating that treatment with felzartamab does provide clinical benefit in that disease setting. So we believe that this commercial partnership will help to maximize the value of felzartamab by leveraging our partners' strength. So to put together this commercial partnership will include multiple myeloma and also autoimmune indications. At this point, we are not in a position to disclose the size of the commercial partnership as we are in confidentiality in negotiating with our potential partners. Thank you.

Thank you, Dr. Zang, for taking that question. And thank you, Andres, for your question. Next, we have Wayne Wu from Cantor.

This is Wayne on for Louise. Congrats on the progress. So our first question is, could you share more details about the TJ-CD4B and the 4-1BB platform? How does it compare to CD3 bispecs? And then secondly, with the cost saving initiatives, what is your cash burn rate for 2022 and '23?

Thank you. Well, maybe the first question, I will ask Andrew to address.

Sure, Dr. Zang. Thank you, Wayne, for that interesting question. As we're all aware, bispecific specific T-cell engager platform has attracted more attention lately, particularly with the approval of the recent CD3-based buys from Roche and also J&J recently. I think if you compare the advantage of the CD3-based T-cell engager versus the 4-1BB, clearly, the 4-1BB platform has the advantage in that the T-cell engagement is only related to the mature T-cells. In addition, our platform has the added advantage of engaging T-cell only upon the tumor antigen binding. For example, in our Claudin 18.2 4-1BB molecule, is only upon the binding of Claudin 18.2 positive tumor cells will allow the T-cells to be active at the tumor side.

So definitely, this will allow us for more favorable safety profile, and we can spare the systemic toxicity that's actually has been reported in the CD3 platform, including cytokine release syndrome. And also, we do actually maintain the antitumor activity. So we feel very strongly our platform strikes the balance of actually improving the safety profile, but also maintaining the antitumor activity. Our trial definitely right now is progressing very smoothly. We have escalated dose up to 8 mg per kg dose level without encountering DLT. So we hope our clinical experience will validate the utility of this platform. And also more importantly, if we can really validate this platform with our ongoing Phase I trial, it really opens the doors of targeting additional more relevant tumor-specific antigen using the similar platform. Thank you.

Thank you, Andrew. Maybe for -- for the second question, I would ask John to address. John?

Thank you, Dr. Zang. Wayne, let me give you a brief answer to your question about the cash burn. The actual cash burn in the first half was around $85 million, and we expect to reduce the cash burn in the second half with the implementation of our cost and expenses initiatives I just discussed. The annual cash burn rate we expect to [manage] that in the range of $150 million to $160 million for 2022. For next year, 2023, we will continue to execute on our prioritization strategy and expense initiatives, including facility consolidation, R&D projects, prioritization and headcount review. We target to further reduce the operating cash burn to around $120 million going forward. Thank you, Wayne.

Thank you, Wayne, for that thoughtful question, and thank you, John and Andrew, for those detailed responses. In the interest of time, we'll ask one more question, Albert Lowe from Piper.

This is Albert on for Joe Catanzaro. I had a question on the uliledlimab cohort expansion. Where are you in the enrollment stages? And when will you provide future updates? And maybe a follow-up after that.

Yes. Thank you, Albert. Andrew, could you address that question?

Sure, Jingwu. Thank you, Albert, for that question. So indeed, our CD73 antibody, uliledlimab is continuing with the current Phase II trial. Since the initial report that we share with you on 19 patients in the treatment-naive non-small cell lung cancer cohort. Definitely, we have demonstrated the encouraging efficacy signal with an ORR approaching 26%. And also interestingly, we have demonstrated the potential correlation of baseline CD73 expression with the overall response in the initial cohort. Since then, we have continued the efforts trying to rapidly expand this cohort to gain additional confidence of the clinical efficacy, but also giving additional gauge on the utility Phase l CD73 expression, in terms of predicting the overall response.

So I think I'm very happy to share with you at this moment, we have definitely continued the enrollment up to 47 patients. We are targeting to finish the target enrollment of this cohort up to 60 patients by October. So with adequate follow-up, we hope we can share the data with you by the end of this year or early next year. But at this moment, even with the 47 patients at this stage, I think I'm very happy to share with you with a high level of data that the trend of the ORR still holds and also interestingly that the baseline expression of CD73 continues to show the trend of correlating with the overall response rate. So obviously, we'd like to see this data to be more mature.

Okay. Great. I was also wondering if you would be sharing more details on the potential Phase III design?

Yes. No, Albert, our goal is definitely trying to move forward based on the existing data so that we can actually design the critical registration trial. It's very clear. We will target non-small cell lung cancer as a tumor type, and we will also target in the advanced non-small cell lung cancer. I think with regard to the specific Phase III design, as you know, this is a very competitive space as well with multiple agents available. So we are taking a very close look at the adequate space that we can leverage the Phase III design. Currently, we are in close discussion with the KOL, both in China and also in the U.S. So we hope that we can share with you with the final Phase III design relatively soon. But of note, we are currently developing a diagnostic kit in collaboration with WuXi Diagnostics. So that we can have a CD73 expression diagnostic kit that hopefully will be implemented timely with our Phase III trial upon its activation. Thank you, Albert.

Thank you, Albert, for your question. And thank you, Andrew, for that detailed response. With that, I'd like to conclude I-Mab Biopharma's Financial Results and Business Update Conference Call for the 6 months ended June 30, 2022. Thank you to Dr. Zang. Thank you to Dr. Zhu and thank you to John for your discussion today, and thank you, everyone, for the questions. And thank you for all our stakeholders for dialing in. If there are any questions, please contact your local IR representative. Thank you.

Thank you.

Thank you all.